TransCanada's Keystone XL Gets Nod From U.S. State Department

Shutterstock photo

Bringing in pleasant news for TransCanada Corporation TRP , the U.S. State Department has finally green-lighted the company's controversial Keystone XL project.

Just a month back, a U.S. federal judge, Brian Morris, issued a decree requiring the State Department to conduct a fresh environmental evaluation of the Keystone XL pipeline under the new alternative route. The judge believed that the alternative route proposed by the Nebraska Public Utilities Commission had not been properly assessed.

However, after careful review, the State Department claimed that the emerging environmental risks from the pipeline are minimal and not likely to have any major impact on the groundwater along the route, even in case of leaks and spills.

Past Challenges Galore

The $8-billion Keystone XL pipeline, with a capacity of 830,000 barrels, was designed to improve oil extraction from Alberta's oil sands and the Bakken region in the U.S. refineries. The initial phase of the pipeline project was finished in 2011. A proposal was made to add another 1179 miles to the 2100-mile-long pipeline.

However, the proposed extension was strongly opposed by environmentalists and politicians, owing to risks involved in transporting bitumen and crude to the United States, as this might emit greenhouse gases. In November 2015, president Obama rejected TransCanada's application to construct the Keystone XL pipeline on fears that it would weaken United States' position in the international climate change negotiations. However, in 2017, both the projects were cleared by President Trump as he was of the opinion that the development of such pipelines can revive the economy.

While the 1,172-mile Dakota Access Pipeline became fully operational in June 2017, Keystone XL has been facing regulatory obstacles, route challenges and opposition from landowners, environmentalists and Native American tribes.

Last year, TransCanada had to stall operations at the existing Keystone pipeline, following a spill of around 5,000 barrels in Marshall County, SD, highlighting the risk posed by the pipeline expansion.

It cleared a major regulatory hurdle when Nebraska commissioners approved the Keystone XL project, although on an alternative route to the one proposed by the company. The alternate route will likely balloon costs and delay the disputed pipeline project further. The alternate path calls for a 63-mile detour, and attempts to add 5 miles of pipeline along with additional transmission lines, and pumping stations.

In August 2018, the State Department was ordered to re-examine the changed route under the National Environmental Policy Act, per Morris' ruling. Morris was of the view that under the alternative route that is likely to be longer, the pipeline would run across different countries and water bodies, posing environmental risks to indigenous communities and marine life.

Verdict Doesn't Put an End to Worries

The State Government has given its nod after re-examination, claiming that the pipeline would not lead to significant environmental concerns. Additionally, the conducted review ensures that TransCanada has an oil spill response plan ready, in case of emergency. The State Department has noted that TransCanada has a lower overall spill rate than the pipeline industry average. Nonetheless, the project has been receiving backlash from green campaigners.

The project is also facing other challenges in Nebraska, pursuant to a lawsuit currently pending before Nebraska Supreme Court, which is not expected to get resolved by this year. In the latest bid to halt the pipeline, two native American communities have sued the Trump administration, claiming that it fabricated the environmental analysis of the project.

Zacks Rank and Key Picks

Currently, TransCanada carries a Zacks Rank #3 (Hold).

TransCanada Corporation Price

TransCanada Corporation Price | TransCanada Corporation Quote

Investors interested in the sector can opt for some better-ranked stocks like Petrobras PBR , Atlantic Power Corporation AT and RGC Resources Inc. RGCO . While Petrobras and Atlantic Power sport a Zacks Rank #1 (Strong Buy), RGC Resources has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Petrobras' top line for 2018 is likely to improve 7.5% year over year.

Atlantic Power's 2018 earnings are expected to grow 211.1% year over year.

RGC Resources' full-year earnings are expected to grow 5.8%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Atlantic Power Corporation (AT): Free Stock Analysis Report

Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report

TransCanada Corporation (TRP): Get Free Report

RGC Resources Inc. (RGCO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: AT , PBR , TRP , RGCO

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?